Capital Markets

Analysts hail plans to protect investors from stockbrokers

Investors camp outside the offices of Discount
Investors camp outside the offices of Discount Securities, seeking refunds after learning that the firm was experiencing financial problems. 

The requirement that capital market players receiving money from investors take professional indemnity insurance to cover losses that may arise from their default or negligence will improve investor confidence, an analyst has said.

George Apaka, the chief investment officer at the Old Mutual Investment Group, said the decision by Deputy Prime Minister and Minister for Finance Uhuru Kenyatta to increase capital requirements for stock brokers and investment banks to Sh50 million and Sh250 million respectively will also improve investor confidence.

Mr Uhuru announced a raft of measures in last week’s Budget, outlining measures to cushion investors from rogue players and to improve economic growth.

Withholding tax in long term government bonds and infrastructure bonds were cut from 15 per cent to 10 per cent and the minister also zero-rated VAT on financial services.

Mr Kenyatta increased the amount of tax exempt pension payments from the current Sh15,000 to Sh25,000, a major relief to pensioners.


The minimum funding level for defined benefit schemes was increased from 80 per cent of their liabilities to 100 per cent, a move likely to increase pensioners confidence in such schemes.

He proposed that new investments by pension schemes that receive statutory contributions be invested in Government securities and infrastructure bonds issued by public institutions only.

“The focus of this year’s Budget centred around revamping and sustaining economic growth, which ultimately should promote investment.

There were increased allocation to infrastructure spend, initiatives within agriculture, manufacturing, energy, ICT and devolution of funds to the grass roots levels to promote investment,” said Mr Apaka.

He said investors emerged winners since they would be include the common man who has been cushioned from the current harsh economic environment because there have been no additional tax or excise duty increases, while manufactures will also benefit from various stimulus announced by the minister.

He termed the revenue targets as “aggressive” on the backdrop of difficult economic environment yet there has not been increase in taxes. He, however, said the planned borrowing of Sh109 billion from the domestic market will need delicate balancing not destabilise the credit market.